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Buyers Pay For Privacy

Aug 1, 2007

Consumers will pay more to shop at websites that protect privacy, according to a study by Carnegie Mellon University, especially when there is an easy way to know which online retailers have strong privacy policies.

One way to make that determination is if privacy rankings appeared along with results from major search engines, says Lorrie Cranor, one of the authors of the study and an associate professor at the Pittsburgh, PA university. She says she has had discussions with, "more than one," search engine about this. "None of them have said 'yes we'll do it,' but we've had some interest," Cranor says.

She says the results of the study suggest that online retailers that have strong privacy policies, such as promising not to share consumer information with others and not to bombard customers with marketing emails, should make that clear in simple language on a prominent web page.

"We've learned that if you don't make privacy information really obvious, nobody knows about it, because people don't actually read privacy policies," she says. "If you have a privacy policy that's better than your competitors, you should let people know about it."

The study, conducted last fall in a laboratory setting involved 72 individuals who had credit cards and made purchases online. They were each given $45 and instructed to use their own credit cards to buy batteries and a vibrator, an item chosen because consumers would be likely to want to keep the purchase quiet. Each purchase was expected to cost around $15. Consumers had an incentive to search for the lowest price, because they could keep any money left over.

Participants were divided into three groups: one saw privacy rankings of retailers, a second saw only what the search engines normally present, and a third saw additional information that had no relation to privacy. Those who saw privacy rankings were more likely to purchase at sites with strong privacy policies, even if they had to pay more.

"When we have privacy information, we see at least two thirds of people will make a purchase not at the first site on the list but a site that offers some additional privacy protection, even at a higher price," Cranor says. Those with privacy information paid an average of 60 cents more per item.

The privacy information was presented in four squares next to each search result. Sites with the strongest privacy protections had four green squares, while those with the weakest protections had no green squares.

The ratings came from a technology called Privacy Finder. It can assess the privacy information on a website automatically, as long as the privacy policies are presented in a standardized format known as P3P. The format was developed by the World Wide Web Consortium, an international body that develops Internet protocols. Cranor was one of the P3P authors.

Privacy Finder submits search queries to Google and Yahoo, obtains the results, then checks for privacy policies on the sites. Displayed icons show the privacy level of each site. Privacy Finder was developed by Carnegie Mellon's Usable Privacy and Security Laboratory.

Cranor says Privacy Finder is running on a Carnegie Mellon server, but has few users. "Imagine if this were built into a major search engine and everyone saw these privacy icons," she says. She adds that it would be an incentive for retailers to adopt strong privacy policies and present them in the P3P format to have high privacy ratings on a search results page.

Cranor says her team plans further studies. One will involve volunteers who will use Privacy Finder as they shop from their home computers to see whether the privacy rankings influence consumers' purchase decisions under nonlaboratory conditions.

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